Avoiding Kindleberger’s trap: A dollar coalition of the willing
Federaţia Rusă
In the event of dysfunction in dollar funding markets, the Federal Reserve can supply liquidity through standing central bank swaps. This column considers a scenario in which the Fed declines to extend such credit. It argues that 14 major central banks hold roughly $1.9 trillion in US safe assets. They could form a dollar coalition of the willing by pooling their dollar holdings and swapping them when needed. An inferior international lender of last resort beats no international lender of last
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